James Twine, a Partner and Head of Business Services at Wolferstans, discusses the impending ban on ‘Fire & Rehire’ practices under the Employment Rights Bill.
The UK government is poised to overhaul the controversial employment practice known as ‘Fire & Rehire.’ While this approach has been used by some employers to renegotiate contract terms, particularly in times of operational change or financial difficulty, new legislation will soon make it almost entirely unlawful. As such, retailers must understand what’s changing, when it will happen, and how to prepare to avoid costly legal pitfalls.
What is Fire & Rehire?
Fire & Rehire refers to the process of dismissing an employee and immediately re-engaging them on revised contractual terms. Historically, it has been used when employees decline proposed changes to their contracts, such as altered working hours, shifts or pay structures.
While not always used maliciously, high-profile scandals involving major companies have brought this practice under intense scrutiny. The government has responded by drafting revisions to the Employment Rights Bill, which is currently progressing through Parliament and could come into force as early as October 2025.
It’s hoped it will prevent employers from using dismissals as a negotiation tactic. Once the new law takes effect, dismissing an employee solely for refusing a contractual change will be deemed automatically unfair.
How will this affect retailers?
Retailers often rely on flexibility, especially when it comes to staffing. Busy seasons like school holidays or the Back to School rush demand changes in shift patterns, hours or even duties. Currently, many employers use variation clauses in contracts or, as a last resort, the Fire & Rehire route to implement changes when staff do not consent.
After the law changes, this option will be severely restricted. Retailers will no longer be able to fall back on dismissal as a way to enforce changes. Instead, they must negotiate any variations in contract terms with employees directly. If no agreement is reached, the status quo remains – unless a very narrow exemption applies.
What are the legal exceptions?
There will be very limited situations where Fire & Rehire remains lawful. To rely on the exemption, a retailer must demonstrate both:
- That the contract change is necessary to address serious financial difficulties threatening the business’s ability to operate; and
- That no reasonable alternative was available.
This is a high bar. For example, a retailer facing insolvency and having already tried to implement voluntary changes or cost-saving measures might qualify. But even then, dismissals must be a last resort, and proper consultation is essential.
A new Code of Practice
Alongside the legislation, a mandatory Code of Practice will be introduced, setting out best practices for handling contract changes. While the Code itself isn’t law, employment tribunals will consider whether an employer followed it. Failure to do so could result in uplifted compensation awards in legal disputes.
The Code emphasises meaningful consultation with employees, exploring alternatives and avoiding coercive tactics. For retailers, especially smaller independents without in-house HR support, following this process will be essential to stay on the right side of the law.
Risks of getting it wrong
Retailers who ignore the new law could face significant consequences:
- Unfair dismissal claims: Employees dismissed for refusing contract changes will be in a strong legal position.
- Financial penalties: Tribunals may award increased compensation where employers fail to follow the Code of Practice.
- Reputational damage: Negative publicity could harm customer trust and deter future recruitment.
- Union action: In larger or multi-branch retailers, improper dismissals could trigger industrial disputes.
Workarounds – such as falsely labelling dismissals as redundancies or replacing staff with agency workers – are also fraught with risk. Tribunals will look behind such tactics and impose penalties where employers are seen to be circumventing the law.
What should retailers do now?
Preparation is key. Retailers should take proactive steps long before the law takes effect:
- Review all staff contracts – Identify any variation clauses and assess their robustness in light of the upcoming legal framework.
- Plan ahead for operational changes – If seasonal shifts or extended hours are required, consider introducing flexible terms now, while it’s still lawful to do so.
- Engage with staff – Begin cultivating a culture of consultation. Employees are more likely to agree to changes when they feel involved in the decision-making process.
- Train your managers – Ensure those responsible for staffing understand the legal shift and the importance of proper consultation.
Retailers should also consider legal advice when contemplating contractual changes that may be challenged in the future, but the time to act is now. Waiting until the legislation is passed could leave businesses scrambling to adapt, exposed to legal claims and reputational harm.